Tag: real estate

Popular Earns €1,500m From Property Sales In 2014

19 January 2015 – El Economista

Banco Popular earned around €1,500 million from the sale of property in 2014, which represents a two-fold increase on the amount recorded in 2013 (€774 million), according to estimated figures released by the entity. In 2015, the bank expects to sell properties amounting to approximately €2,000 million, an increase of 33%.

Since the end of 2013, when the entity led by Ángel Ron sold the management of its real estate business to Värde Partners and Kennedy Wilson, the rate of sales has skyrocketed.

In fact, it reached a record high in the third quarter of 2014 despite seasonality, with sales of €391 million, compared with €240 million in the same period in 2013, an increase of 63%. Real estate arrears during this period amounted to 57.4%.

Between July and September, 80% of the properties sold were acquired by foreign customers and the remaining 20% were bought by domestic clients. By type of product, 55% of sales corresponded to finished properties and the remaining 45% related to land.

POPULAR (POP.MC) closed the first nine months of the year with cumulative sales of €989 million, equivalent to the sale of 5,148 units. Sources at the entity have explained to Europe Press that the majority of the bank’s properties are located in Andalucía (31%), Valencia (15.7%), Cataluña (12.2%) and Galicia (12.1%).

The CFO of Banco Popular, Francisco Sancha, revealed these sales forecasts during his speech at the “Spain Investor Day” forum, where he outlined the key aspects of the entity’s strategy and defended the profitability of its business model.

AGREEMENT WITH VÄRDE PARTNERS AND KENNEDY WILSON

In November 2013, Popular sold the management of its property business to Värde Partners and Kennedy Wilson for €800 million. This portfolio included loans relating to development and construction, as well as foreclosed real estate assets.

This transaction has allowed the bank to maximise the management of its real estate business and focus on the core activities that underpin its business model, namely, retail banking, and banking for SMEs and households.

Original story: El Economista

Translation: Carmel Drake

Acciona Expects To Record A Profit In 2014 And Seeks Real Estate Opportunities

14 January 2015 – Expansión

Acciona expects to return to profitability in 2014 having recorded losses of €1,972 million in 2013, when it was hit by the Government’s electricity reform, which led to the impairment of its renewable assets.

The announcement was made today at Spain Investor Day by Acciona’s Director General of Corporate Development and Investor Relations, Juan Muro-Lara, who stressed that the company is also focusing on the new opportunities that it expects to arise in the real estate sector, paying particular attention to the residential market, which represents the backbone of its new strategy.

In fact, as part of the transformation plan launched in 2014, the company has already strengthened its real estate business, by hiring Walter de Luna as the Managing Director of its real estate arm following his departure from Sareb, where he served as number two.

This new strategy has also included the hire of Luis Moreno by Acciona Real Estate, a close associate of Walter de Luna, who also joins from Sareb.

Looking to the year ahead, the company expects growth opportunities in the energy sector to be reactivated; to consolidate the integration of its infrastructure businesses and acheive improvements in its results; to search for opportunities to collaborate and grow in the real estate sector; the stabilisation of Bestinver; and the sale of Trasmediterránea.

With the results for 2014 pending publication, including the real impact of the energy reform, the company forecasts an estimated impact of €365 million or 25% of gross operating profit (EBITDA).

The company’s new roadmap also seeks to reduce the ratio of net debt/EBITDA from 5.7x to 5x by December 2014. In this context, the company is analysing the sale of its shipping arm, Trasmediterránea, as it adopts measures aimed at improving the operations of the division.

Efforts in 2014, when Acciona took the decision to cancel its dividend distribution, focused on reducing costs, undertaking the divestments needed to focus on the ‘core’ business and reorganising its corporate division, as well as on its management company, Bestinver, following the departure of Francisco García Paramés after 25 years with the company.

Despite the losses recorded in 2013, the company recorded profits of €149 million during the first nine months of 2014, up by 98.5% on the same period in 2013, driven by an extension of the loan repayment period for its wind energy assets and certain divestments made during the period.

Original article: Expansión

Translation: Carmel Drake

Armabex Launches First REIT Directed To Small Homeowners

02/01/2015 – El Confidencial

New year, new REITs. The corporate form that is revolutionizing the real estate sector will have in the first half of this year a new tenant who promises to expand the tax advantages of these companies to any small and medium-sized property owner, but who lacks the minimum capital of five million euros needed to start a company of this type.

Armabex Managers is the company whose aim is not to go to the market to raise money to invest in real estate, as has been seen up until now, but to directly capture individual properties and, with this formulated portfolio, go public. As President of Armabex, Antonio Fernández, said, “We are the first vehicle based on property raising, since the first contributions will be made only with assets, not money.”

The new REIT is launching with a Valencian investor who will provide 120 homes valued at about 10 million euros, ensuring the viability of the project; various other owners, who have already expressed interest in joining the project before beginning to trade on the MAB in the first half of the new year, will also partake. The requirements to participate in this process are to provide a preset minimum equity of 120 billion euros in available housing, either without charges or where the mortgage represents less than 50% of the property, and that have been for rent during a minimum of six months in the last year.

“The main advantage of this REIT is that it allows small and medium-sized property owners, who have either inherited their properties or are professionals who have been building an asset portfolio consisting of apartments, to liquidate and get a return without worrying about all the management problems that these properties entail,” said Fernandez.

In principle, the REIT will limit its action to Madrid, Barcelona, Bilbao and Seville, where it will have a network of real estate agents who will market the properties. In addition, each year there will be four ‘windows’ of liquidity, which will allow the entry of new members via transfers of assets and, after the first year, one window for cash investments.

REAL ESTATE SECURITIZATION

“To ensure transparency, we are in negotiations with two large real estate consultants, to select one which will be responsible for valuing properties according to clearly defined standards,” Fernandez said. These valuations are carried out each year to update the value of homes and put them in value also in terms of the ‘windows’ as they being opening each year.

Each property owner will have a share in the company based on the valuation of their assets over the total of the REIT. Alongside the annual dividend, they will benefit from the returns Armabex expects to obtain through the revaluation of assets, since the company is being created at a low point in the market — which gives the company confidence that the value of these properties will increase with time — and the management that the company will carry out by buying and selling assets.

From the third year onwards, Fernandez plans to start divestments of homes that have been provided to the company and, with the money earned, to buy other apartments, in addition to acquisitions that will take place after the second fiscal year with cash investments. “Our goal is to ensure an annual coupon of between 150 and 250 points above the ten-year bond yield plus the profit obtained with revaluation of the REIT”.

Being a listed company, the investors that provide their homes, if they need liquidity, may sell shares directly in the market, allowing them to easily monetize an asset as illiquid as housing. “Basically, this is a securitization of real estate,” said the president of Armabex, convinced that this type of product can be a solution, for example, to deal with issues based on property inheritance.

Armabex was the first firm to request the incorporation of a REIT on the MAB (Alternative Stock Exchange Market). It was in March 2013 when Armabez, as a registered advisor, coordinated Promorent’s entrance into the market, which solidified in November. Now it has decided to take a step further and create its own listed real estate investment company, acting as a consultant.

Original article: El Confidencial (by R. Ugalde)

Translation: Aura REE

Spain Will Have Almost 27,000 Square Metres Of Shopping Centres By The Close Of 2014

18/08/2014 –  Mislocales

In the third quarter of the year, work will start on the extension of the Roca Village shopping, property of Value Retail, which will add 6,500 square metres of GLA to its total surface area, and on that of the Puerta de Chiclana shopping centre, which will add 4,395 square metres of GLA to its current area, while SagunCenter will begin its second phase of construction, which has 16,000 metres square.

Added to this are the three new shopping centres which have opened their doors this year – El Nevero, located in Badajoz and which has a GLA of 10,000 metres square; la Ciudad de la Imagen, in Seville, with 21,500 metres square of GLA and the Ikea Parc de Alfafar (Valencia), which has 37,300 metres square of GLA.

In the next two years there are, at least, sixteen new shopping centres expected to open their doors in the Spanish market. All of them will add more than 500,000 square metres of GLA to the current shopping centre space, which at the end of 2013 represented a total of 15.29 million square metres, according to data from the Spanish Association of Shopping Centres (AECC).

 

Original article: Mislocales
Translation: Aura REE

Defaulted Property Loans In The Banking Sector Fall For The First Time In The Financial Crisis

14/08/2014 – El Economista

The five large banks show a 9,5% reduction in the balance of bad debts since December
Financing with a risk of going into insolvency falls by €1.000 million.

The real estate sector, the biggest headache for the banking sector in the last few years, is starting to show signs of a timid improvement after a contraction of colossal proportions. This is the indication given by the five largest banks, which have not transferred assets to the bad bank, by reducing the volume of defaulted consumer loans for the first time during the financial crisis.

Specifically, Santander, BBVA, La Caixa, Sabadell and Popular have together managed to reduce this type of bad loan by 9,5% in the first half of the year compared with the end of 2013.

At present, finance given out by these banks to real estate companies in Spain and which is more than three months behind in payments amounts to €41.233 million, that is, €4.322 million less than at the end of last year.

The fall is nonetheless still slight, since in year on year terms these problematic loans have slightly increased. In June of this year the defaulted portfolio is 2,7% higher than at the end of the first half of 2013.

Nevertheless, the reduction has allowed the banks to lower the volume of total bad debts. The main bankers have underlined in recent weeks, during the presentation of results, that the doubtful loans had fallen in the first six months of this year, therefore starting a new trend.

Reduction of subprime loans

The decline of bad debts has also been accompanied by a reduction in loans to property developers which are considered subprime (up to date with payments but with a high risk of defaulting). In the five large banks this category of loan reduced by 1.142 million, to slightly less than 8.000 million.

This means that there is a lower risk in the immediate future that the volume of bad debts will rise, since subprime loans are the forerunner of defaulted ones.

Of the big five, Banco Popular is the only one to have not yet managed to reduce the level of defaulted loans to property developers, although it has stabilised them, since they have barely grown 0,5 per cent, up to 11.600 million. With this rise and the reduction recorded by the rest, it is now the banking group with the highest levels of doubtful financing. As well as the defaulted loans, it has on its balance sheet a further 2.266 million which is qualified as subprime.

La Caixa, on the other hand, is the bank which has recorded the greatest reduction, one of 18,5%. In its  case, the level of insolvent loans is around 9.760 million. Sabadell bank’s portfolio of defaulted loans, not covered by funds used to help CAM bank, has also recorded a significant fall, more than 12%.

The financial sector, an important player in the property boom in Spain at the start of this century, has been obliged to suffer a real hardship after the outbreak of the financial crisis. It has had to recognise millions in losses, the majority related to the construction industry, due to the suffocating of property developers as well as some households, which have stopped paying their debts after the fall of the sector, and the consequences this has had for the economy.

The financial system, at the time when it was recognising provisions to cover the hole, was carrying out swaps of debts for properties in order to recover part of the losses in the future.

Portfolio of homes

As a result, the stock of homes and plots of land in the hands of the banking sector has been rising exponentially. At the end of June, the portfolio of properties –which includes holdings in development companies – reached historical maximums in the case of the five large financial groups. Its gross value has reached almost 71.000 million.

In spite of the acceleration of sales in recent months and the fall of defaulted loans to property developers, in the first half of the year this stock began to grow again. Its value rose by 4% (2.811 million).

A large part of the rise is due to the increase which both the portfolio of plots of land and the repossession of family homes have experienced due to insolvencies.

Properties owned by the banks are also proving to be a major obstacle for the banking sector, since it is having to recognise significant provisions in order to bring forward future losses and to reduce their value with the aim of selling them as soon as possible.

The provisions recognised by Santander, BBVA, La Caixa, Sabadell and Popular amount to 35.200 million, with which the level of coverage of this risk exposure is around 50%.

The swaps of assets for debts, the conversion of the debts to defaulted ones, some sales of loans and the expiry of other credit lines is reducing finance provided to developers of the sector at an accelerating rate, at a time when new loans are not being issued. Loans are only restructured in order to provide means of assisting companies to pay.

The big five banks have reduced this type of loan to less than 69.000 million. In 2010, according to data available, the quantity exceeded 102.000 million.

Slow recovery

The situation, with these figures, is hopeful. The signs are that the contraction of the bricks and mortar sector and its effects on banks seems to be coming to an end, although the banks are not celebrating yet, since the recovery needs to be confirmed and it is expected to be a slow one.

The consequences of the sinking of the property sector have been such that Spain was obliged to request a bail out from Europe in order to cleanse a large part of the financial sector and create a bad bank, known as Sareb, with the devalued assets. This company has assumed 50.000 million in loans to developers and properties of the rescued banks.

One of them was BFA-Bankia, another of the country’s large banks. After the handover of these assets to Sareb, its exposure to the property market was limited to less than 2.300 million in loans, of which 1.453 million are in default and another 250 million considered subprime.

Furthermore, its portfolio of properties has been reduced by some 5.350 million, thanks to the transfer of homes and land of significant value to Sareb and a minimum reduction of such assets in the last six months due to an increase in sales. In BFA-Bankia’s case, the coverage of this stock is 44,5 per cent, five percentage points below the average of the five big banks which have not received bail outs.

Original article: El Economista (by F. Tadeo)
Translation: Aura REE